This week, an internal FBI report was leaked, detailing the Bureau's concern about the virtual currency Bitcoin and its potential to be exploited by criminals for money laundering and other scams.

Bitcoin is unique because it is the only decentralized, P2P network-based virtual currency. The way itcreates, operates, and distributes bitcoins makes it distinctively susceptible to illicit moneytransfers, and manipulation through the use of malware and botnets.

The anonymous transfer of virtual currency Bitcoin's payment network allows means two people can complete an exchange of goods without ever having to know anything more about each other than a 36-character string of numbers and letters, a Bitcoin address or account.

This means, then, that it is relatively easy to use Bitcoin anonymously for the purchase of illegal goods, like narcotics or kiddie porn, as long as a proxy is used to anonymize the IP address. To that end, Bitcoin may also prove a favorable network to terrorists, human traffickers and the like. And, of course, like so much else, it is not immune to hackers.

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Curiously, further down in that same report, a bullet-point list advises how a Bitcoin criminal might best protect his or her anonymity?! Ah, well. They didn't anticipate the document leaking, I suppose.

In any event, this is really most interesting because of its potential implication in a case of self-produced and distributed kiddie-porn, should any of those stripping-for-Bitcoins babes turn out to be underage.
[Wired]